THE FIRST INTERNATIONAL BANK OF ISRAEL LTD v. D. R. A. TRADING LTD AND ANOTHER

DCCJ2216/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2216 OF 2003

__________

__________

_________________________

REASONS FOR DECISION

_________________________

1. This is an application by the 2^nd Defendant for leave to appeal against the judgment entered herein against him pursuant to Order 14 of the Rules of the District Court, whereby he is ordered to pay to the Plaintiff the sum of US$35,218.75, or its equivalent in Hong Kong dollars at the time of payment, together with interest and costs (“the Judgment”).  Unconditional leave has been granted to the 1^st Defendant to defend this action.

2. There is a further application by the 1^st and 2^nd Defendant for leave to appeal against the dismissal with costs of their application for the Plaintiff to provide security for costs of this action (“the dismissal”).

3. The 2^nd Defendant also applies for stay of execution of the Judgment pending the determination of his appeal.

4. The Defendants take out these applications by a Notice of Ex-parte Application for Leave to Appeal filed herein on 9^th May 2006.

5. Mr. Danny Ng of Counsel appears for the Defendants.  The Plaintiff has not been served with the Notice.  Nor has it been notified of the date and time of hearing.  There is therefore no appearance for the Plaintiff.

6. A preliminary issue has arisen, namely, whether the Defendants should take out these applications by an inter partes or an ex parte summons.  What is at stake is of course not merely the form of the application, but also the fundamental principle whether or not the Plaintiff has a right to be heard at the hearing of these applications and to oppose them if it deems fit.

7. Mr. Ng submits that the Defendants are entitled to take out these applications on an ex parte basis.  He stresses that there are no rigid rules, practice or guidelines that require an application to the District Court for leave to appeal to the Court of Appeal to be made by an inter partes summons.  On the contrary, he refers to two cases that he says support his submission that the application shall be made on an ex parte basis.

8. The first case is Smith v Cosworth Casting Processes Ltd. (Practice Note) [1997] 1 W.L.R. 1538.  Mr. Ng refers in particular to paragraph 4 of the guidance issued by Lord Woolf, M. R.: -

“4. When leave is granted, the applicant does not need to know more than that he has the leave which he needs and therefore that he is entitled to proceed with the proposed appeal.  The intended respondent has no entitlement to receive reasons as to why the application has been granted, in the same way that he does not normally have any right to be heard on the application which is usually made ex parte.”

9. Mr. Ng submits that since the Hong Kong courts have adopted and followed the guidance given in the Cosworth’s case in the determination of applications for leave to appeal, the same logic and rationale as stated in the judgment should equally be applied and followed.  He submits that the intended respondent in an application for leave to appeal has little interest in the application because the only issue in the application is for the applicant to show that he has a realistic prospect of success if he is given leave to appeal.  He stresses that Lord Woolf, M.R. has made it clear that the intended respondent does not normally have the right to be heard on the application, and that the application is usually made ex parte.

10. The second case is Tin Shui Wai Development Limited v Yiu Sun Hung, DCCJ569/2003.  After dismissing the application for leave to appeal, His Honour Judge L. Chan awarded costs to the respondents and said,

“Since the respondents have been served with both application as well as the skeletal submissions, I think even though such proceedings could have taken place on an ex parte basis, it is appropriate in this case to award costs and to award it to follow the event.”

11. Mr. Ng submits that the observation made by His Honour Judge L. Chan shows that an application for leave to appeal can be made ex parte.

12. To give further support to his submissions, Mr. Ng also refers to his previous experience when he had been criticized by a District Judge for having issued an inter partes summons for an application before the learned judge for leave to appeal to the Court of Appeal.

13. Similar to Mr. Ng, I cannot locate any direct authority on whether an application to the District Court for leave to appeal to the Court of Appeal has to be taken out on an inter partes or ex parte basis.

14. According to my understanding, the Registrar of the District Court had at one stage directed that an application for leave to appeal against the judgment of a District Judge should be taken out on an ex parte basis.  Against this background, it is hardly surprising that Mr. Ng had the experience of being criticized for taking out an inter partes summons.  However, the decision of another District Judge, if a decision had been made at all, is only a persuasive authority and not binding on me.

15. The practice in the Registrar of the District Court changed in or about mid-2004.  The current practice is that the applicant will be advised to take out an inter partes summons, but if the applicant insists on issuing an ex parte summons, the Registrar will allow the summons to be issued (like the present case), and leave it to the presiding judge to decide whether he will direct the summons to be served on the intended respondent to the appeal.

16. If Mr. Ng’s submission is correct and an applicant is entitled to apply for leave to appeal to the Court of Appeal before a District Judge on an ex parte basis, it must follow that the judge hearing the application should not direct the summons to be served on the intended respondent to the appeal unless exceptional circumstances or good reasons exist to justify that course of action.  It is therefore essential to decide on the validity of Mr. Ng’s submission. 

17. I have considered the two cases cited by Mr. Ng, but I do not find any of them supports his submissions.

18. I shall deal with the Yiu Sun Hung’s case first.  In that case, the applicant applied for leave to appeal from the District Court to the Court of Appeal against the judgment of His Honour Judge L. Chan by taking out an ex parte summons before the learned judge.  He had however served the application and its skeleton submissions upon the respondent who attended the hearing and successfully opposed the application.  Having heard from the parties, the learned judge dismissed the application and ruled that the applicant should pay costs of the hearing to the respondent.  He made his ruling in the passage cited by Mr. Ng.  It is evident from that passage that the learned judge did not rule, and was not required to rule, whether the application before him for leave to appeal could be taken out on an ex parte basis.  What the learned judges meant was simply that since the respondent had been served with the application, costs should follow the event and it did not matter whether the application could be taken out on an ex parte basis.  In my view, this case sheds no light on the issue under consideration.

19. As far as the Cosworth’s case is concerned, it is true that courts in Hong Kong at different levels have adopted and applied the test stipulated by Lord Woolf M. R. for determining application for leave to appeal, for instance, by Leong J. A. in the Court of Appeal in Ma Pik Yung v Ko Chuen, HCMP4303/1999, and by Her Honour Judge Ng in the District Court in Ted Ohya also known as Ohya, Takaaki v Abdo A Osman also known as Abdo Abdelhanned Osman, DCCJ4042/2005.  According to the test stipulated by Lord Woolf M. R., the court will only refuse leave if satisfied that the applicant has no realistic prospect of succeeding on the appeal, and even if the court is so satisfied, it may still for good reasons grant leave, for instance, the appeal raises a question of law that the public interest requires it to be clarified by the appellate court.  Since this test is, as described by Lord Woolf M. R., “largely a matter of common sense”, it can surely be applied with equal force and effect in any court charged with the duty to grant or refuse leave to appeal.  It is therefore hardly surprising that the same test is adopted and applied by the courts in Hong Kong.

20. Apart from stipulating the test for granting or refusing leave to appeal, Lord Woolf M. R. also explained, in paragraphs 3 and 4 of the guidance in the Practice Note, why the court would only give short reasons to explain its decision in granting or refusing leave to appeal.  It was in this context that Lord Woolf M. R. stated, “The intended respondent has no entitlement to receive reasons as to why the application had been granted, in the same way that he does not normally have any right to be heard on the application which is usually made ex parte”.  This is the sentence in the whole judgment that Mr. Ng relies heavily upon to support his submission.

21. In my view, when Lord Woolf M. R. stated that the intended respondent had no right to be heard on the application for leave to appeal, His Lordship was referring to the practice in the English Court of Appeal and was not laying down any particular practice intended to be of general application in every court hearing an application for leave to appeal.  In the Cosworth’s case, the plaintiff obtained leave from a single Lord Justice of the English Court of Appeal to appeal against the decision of a District Judge sitting at the Worcester County Court.  The defendant then applied to set aside the leave before two Lord Justices of the English Court of Appeal, though a three-judge court was eventually convened so as to give general guidance on applications for leave to appeal and application to set aside such leave.  It is therefore clear that all applications that Lord Woolf M. R. had been called upon to consider and decide were in fact applications before the English Court of Appeal, and that the practice that had to be followed in the County Court when an application was made before a District Judge for leave to appeal to the English Court of Appeal was never in issue.  For that reason, it was not necessary for the English Court of Appeal to give any guidance on the practice to be followed in the County Court, nor did Lord Woolf M. R. indicate that he had intended to do so.  The practice in the English Court of Appeal may not be the same as that in the County Court in England, or that in the District Court in Hong Kong.  By relying on one particular sentence in the guidance issued by Lord Woolf M. R. to say that a respondent to an intended appeal has no right to be heard on an application before the County Court (or the District Court) for leave to appeal to the Court of Appeal, Mr. Ng has in my view read too much into the sentence and given it a meaning that was just not there.

22. For these reasons, I find that neither of the two cases cited by Mr. Ng supports the Defendants’ contention that they are entitled to take out these applications on an ex parte basis. 

23. Mr. Ng however maintains that while there are no express rules saying that these applications can be taken out on an ex parte basis, there are equally no rules saying that the applications must be taken out on an inter partes basis. 

24. In my judgment, whether or not an inter partes summons has to be taken out can only be resolved by reference to the basic principle of law as well as the particular rules applicable in the District Court.

25. To start with the basic principle of law, the principle of natural justice, which is the fundamental and indispensable cornerstone in the administration of justice, requires that anybody whose right or interest is or may be affected by any judicial relief must be given adequate notice of the application for that judicial relief as well as an opportunity to be heard concerning the merits of such relief: Hopkins v Smethwick Local Board of Health (1890) 24 Q.B.D. 712.  The rule of audi alteram partem requires that the person who has to decide shall hear both sides, and shall give each side an opportunity of hearing what is urged against him, and that no man should be condemned unheard or without having had an opportunity of being heard: Re Brook and Delcomyn (1864) 16 C.B. (N.S.) 403; The Bentley’s Case (1723) 1 Str. 557.

26. An application for leave to appeal is undoubtedly an application for a judicial relief that, if granted, affects the right and interest of the intended respondent to the appeal.   To say the least, if leave is granted, the respondent has to engage in further legal proceedings in a higher court, incur more legal expenses, and face uncertainties created by the possibilities that the judgment that he has already obtained may be set aside, and he may have to withhold execution of the judgment, or proceed with it at his own peril.

27. In Cooper v The Board of Works for the Wandsworth District (1863) 32 L.J.C.P. 185, Byles J. stated as follows: -

“There are numerous cases, coming down to the most recent times, to the effect that when powers are conferred by the legislature which are to be judicially exercised, the person against whom they are to be exercised has a right to be heard; and that if this right be not expressly conferred by the statute, the common law will supply that omission.”

28. While the issue under consideration in the Cooper’s case was not on the practice of a court, what Byles J. had said must be of universal application because his ruling was the obvious and inevitable consequence of the application of the principle of natural justice.  According to the learned judge, if the statute does not expressly state that the person affected has a right to be heard, the common law will supply that omission.  Hence, if the statute providing for the judicial relief is silent on the mode of its application, an application for such judicial relief must be taken out on an inter partes basis so that the person to be affected will have due notice of the application and an opportunity to be heard on its merits, and that the tribunal to decide shall hear from both sides before making its determination.

29. However, this basic principle of law may be displaced under the following two situations.

30. First, the urgency and the nature of the judicial relief applied for may make it impossible or inappropriate for the application to be taken out on an inter partes basis.  For instance, an application for a Mareva injunction or for an Anton Pillar order is usually taken out on an ex parte basis because of the need to prevent dissipation of assets or destruction of evidence by the defendant, and the purpose of the whole application will be defeated if the defendant is given advanced notice of the application.  However, these considerations do not feature in an application to the District Court for leave to appeal to the Court of Appeal. 

31. Second, this basic principle may be overridden by statute.  For the purpose of this discussion, specific reference must be made to Order 59 rule 14(2) of the Rules of the High Court where it is stipulated that an application to the Court of Appeal for leave to appeal has to be taken out on an ex parte basis.  The following sub-rules of Order 59 rule 14 are relevant: -

“(2) An application to the Court of Appeal for leave to appeal shall –

(a) include, where necessary, any application to extend time for appealing; and

(b) be made ex parte in writing, setting out the reasons why leave should be granted and, if the time for appealing has expired, the reasons why the application was not made within that time.

and the Court may grant or refuse the application or direct that the application be renewed in open court either ex parte or inter partes.

(2A) If an application under paragraph (2) is refused otherwise than after a hearing in open court, the applicant shall be entitled, within 7 days after he has been given notice of the refusal, to renew his application; such renewal application shall be made ex parte in open court.

(2B) If an application under paragraph (2) is granted otherwise than after a hearing inter partes, notice of the order shall be served on the party or parties affected by the appeal and any such party shall be entitled, within 7 days after service of the notice, to apply to have the grant of leave reconsidered inter partes in open court.

(3) Where an ex parte application has been refused by the court below, an application for a similar purpose may be made to the Court of Appeal ex parte within 7 days after the date of the refusal.

(4) Wherever under these rules an application may be made either to the court below or to the Court of Appeal, it shall not be made in the first instance to the Court of Appeal, except where there are special circumstances which make it impossible or impracticable to apply to the court below.”

32. These specific statutory provisions have therefore made it mandatory for any application to the Court of Appeal for leave to appeal to be taken out on an ex parte basis by the applicant.  He has to first of all apply for leave ex parte in writing, and the Court of Appeal will make its decision without a hearing, though it may direct the application to be renewed in open court either ex parte or inter partes (Order 59 rule 14(2)).  If the applicant fails in his initial application, he is at liberty to renew his application ex parte in open court (Order 59 rule 14(2A)). 

33. Hence, in either of these instances, the applicant is applying to the Court of Appeal for leave to appeal by taking out an ex parte application.  According to these rules, the applicant is not required to take out an inter partes application, and he is in fact prohibited from doing so.

34. However, Order 58 rule 2 of the Rules of the District Court, which stipulates the rules for application to the District Court for leave to appeal to the Court of Appeal, does not contain similar statutory provisions.

35. Mr. Ng argues that there is no reason or logic why similar practice or procedure should not be followed in the District Court.  He says that the issue before each court is the same, namely, whether the applicant should be granted leave to appeal to the Court of Appeal.  This argument is attractive, but I have to say that I do not agree with this submission.

36. First, the fact that Order 58 rule 2 of the Rules of the District Court does not contain the same or similar provisions as those in Order 59 rules 14(2), (2A) and (2B) of the Rules of the High Court is a clear indication that the practice and procedure to be followed in the District Court when an application is made to a District Judge for leave to appeal to the Court of Appeal are not the same as those to be followed in the Court of Appeal.  If the Legislature intends that an application to the District Court for leave to appeal is likewise to be taken out on an ex parte basis, there is simply no reason why it has chosen not to specify this mode of application in Order 58 rule 2 of the Rules of the District Court, as what it has done in Order 59 rule 14 of the Rules of the High Court.

37. Second, the fact that it has to be specified in Order 59 rule 14 of the Rules of the High Court that an application to the Court of Appeal for leave to appeal is to be taken out on an ex parte basis means that there is no general rule laid down by the case law like the Cosworth’s case that an application to a lower court for leave to appeal to a higher court is to be taken out on an ex parte basis.

38. Third, there is a very good reason why application to the Court of Appeal for leave to appeal should be taken out on an ex parte basis.  In explaining why the Court of Appeal would not usually entertain application by an intended respondent to the appeal for setting aside the leave to appeal granted to the applicant, Lord Woolf M. R. stated as follows: -

“6. In addition, it should be borne in mind prior to making such an application that this court is very unsympathetic to it being made if it will in effect involve the parties in exactly the same expense as determining the appeal itself, and will not necessarily save the time of the court but risk the court having to have two hearings when only one would be necessary if there were no application to set aside.  It is appreciated that any litigant will feel aggrieved by being faced with delay in waiting to have an appeal heard which has no prospect of success.  However, the only consequence of applications such as this having to be heard is to delay the hearings of appeals the determination of which serves some purpose.  There are circumstances where an application to set aside leave is fully justified, but the present application does not fall within that category.”

39. Although the learned judge made these comments in relation to applications to set aside leave to appeal, the necessity and desirability of saving parties’ expenses and avoiding delay as well as duplication of hearings apply with equal force to applications for leave to appeal.

40. However, the same considerations do not apply to an application to a District Judge for leave to appeal to the Court of Appeal.  In this context, it must be remembered that an appeal from the District Court in any civil cause or matter to the Court of Appeal is not as of right but shall only lie with leave from the District Court or the Court of Appeal: section 63(1) of the District Court Ordinance and Order 58 rule 2(3) of the Rules of the District Court.  In addition, it is also clear from Order 59 rule 14(4) of the Rules of the High Court, as well as Order 58 rule 2(4) of the Rules of the District Court, that an applicant who asks for leave to appeal shall first make his application to the District Court, and it is only when he is unsuccessful should he apply to the Court of Appeal for leave.  It is therefore clear from these statutory frameworks that the District Judge is to act as a gatekeeper to screen out any intended appeal that has no realistic prospect of success to be filed in the Court of Appeal.  To perform this function, it is important for the District Judge to have a full hearing on the merits of the intended appeal.  If the applicant is entitled to apply for leave to appeal ex parte, it will only mean that the District Judge can only listen to arguments from one side, and without the benefit of counter arguments from the other side.  If so, how can the District Judge come to a well-informed and considered decision on the prospect of success of the intended appeal?  It must also be remembered that by requiring the applicant to take out an inter partes application, there is still only one hearing before the District Court.  It is because the District Court is only required to decide whether leave to appeal should be granted, and is not required to decide upon the appeal itself.  Hence, there is no duplication of hearings and delay as well as waste of expenses that Lord Woolf M. R. had worried so much and sought to avoid.

41. Fourth, while Order 59 rules 14(2) and (2A) of the Rules of the High Court allows application to the Court of Appeal for leave to appeal to be taken out on ex parte basis, Order 59 rule 14(2B) is specifically enacted to allow the party or parties affected by the leave to take out an inter partes application to ask for the grant to be reconsidered.  There is simply no corresponding statutory provision in the District Court Ordinance or Rules. 

42. Fifth, if it were permissible for an ex parte application to be taken out before the District Court for leave to appeal to the Court of Appeal, it would result in conflicts of the rules.  Order 58 rule 2(4) of the Rules of the District Court specifically stipulates that if leave to appeal is refused by the District Judge, the applicant may, “within a further 14 days from the date of such refusal”, apply to the Court of Appeal for leave to appeal.  In other words, if the applicant is entitled to make an ex parte application to the District Court for leave to appeal, and he fails in the application, by virtue of Order 58 rule 2(4) of the Rules of the District Court, he can within 14 days from the date of such refusal apply to the Court of Appeal for leave to appeal.  However, Order 59 rule 14(3) of the Rules of the High Court provides that “where an ex parte application has been refused by the court below, an application for a similar purpose may be made to the Court of Appeal ex parte within 7 days after the date of the refusal”.  So, which is which?  When an applicant fails in his ex parte application to the District Court for leave to appeal, should he apply to the Court of Appeal ex parte for such leave within 14 days or within 7 days of the refusal by the District Court?  Such apparent inconsistency and conflict between the rules will of course disappear if an application to the District Court for leave to appeal to the Court of Appeal can only be taken out on an inter partes basis, and not on an ex parte basis.

43. Six, Order 58 rule 2(7) of the Rules of the District Court provides that upon an application for leave to appeal, the District Judge hearing the application may in his discretion grant leave to appeal “on such terms as to costs, payment of money into court, giving security for the prosecution of the appeal or otherwise as it may think fit”.  It is difficult to envisage how a District Judge can grant leave to appeal upon any of these terms if the application is taken out ex parte.  It is because the intended respondent to the appeal will not appear, and the District Judge simply does not know whether any term is required to be attached to the leave to appeal.

44. Having considered the provisions in the District Court Ordinance and the Rules of the District Court, I am of the view that not only is there an absence of specific rules that permit an application to the District Court for leave to appeal to the Court of Appeal to be taken out on an ex parte basis, the statutory frameworks in fact tend to show that an inter partes application is required. In any event, there is nothing in the statutory provisions that displaces the basic principle of law that any application for judicial relief should be taken out upon an inter partes basis.

45. For these reasons, I find that it is procedurally wrong for the Defendants to take out these ex parte applications for leave to appeal, and that they should have taken out the applications on an inter partes basis.

46. If I were wrong in this finding and it were procedurally correct for the Defendants to take out these ex parte applications, there is still the question whether I should in the exercise of my discretion direct the applications to be served on the Plaintiff.

47. In considering this issue, I am of the view that it is important to take into account the 2^nd Defendant’s application for stay of execution of the Judgment pending the determination of his appeal.

48. Mr. Ng does not seek to argue that the Plaintiff has no right to be heard on this application for stay of execution.  This is plainly right because a stay of execution affects the right and interest of the Plaintiff, and Order 58 rule 3 of the Rules of the District Court has made it clear that an appeal to the Court of Appeal shall not operate as a stay of the proceedings in which the appeal is brought.

49. If the Plaintiff has a right to appear and oppose this application for stay of execution, it is inevitable that the parties will argue before me the merits of the appeal.  In an application for stay of execution, two matters fall for consideration: merits of the appeal and whether refusal of the stay will render the appeal nugatory: Wenden Engineering Service Company Limited v Lee Shing Yue Construction Company Limited, HCCT90/1999.  On the importance of the merits of the appeal to the application, Ma J. (as he then was) stated as follows: -

“6. In Star Play Development Limited, I said that the existence of a strong appeal or a strong likelihood that the appeal would succeed, will usually by itself be enough to justify the grant of a stay of execution. I said this by reference to the judgment of Litton JA in World Trade Centre Group v. Resourceful River Limited, unreported, 12 May 1993, Civil Appeal No. 70 of 1993, Court of Appeal. It is apparent from that case that the requisite strength of the appeal must be such that the court takes the view that "something has grievously gone wrong with the process of law in the court below".

7. In other words, if the party applying for a stay of execution can demonstrate that it is almost bound to succeed in the appeal, this by itself will almost invariably tilt the balance in favour of granting a stay.

8. On the other hand, if all that can be demonstrated is that the appeal is arguable or even that good arguments exist, something more needs to be shown by the appellant in order to obtain a stay of execution. This is a consequence of the starting point in all applications for a stay pending appeal, namely that, the successful party in the court below is not to be deprived of the fruits of his success. This approach is dictated by RHC, Order 59, rule 13(1). 20.”

50. Mr. Ng invites me to determine the 2^nd Defendant’s application for leave to appeal ex partes first.  He says that if I find that there is a realistic prospect of success in the appeal and grant leave, the Plaintiff can then be invited to argue the application for stay, though at that time since leave to appeal has already been granted, the parties can just focus on arguing the other factors for granting or refusing stay, and leave aside the merits of the intended appeal.

51. Bearing in mind the importance of the merits of the appeal to the determination of an application for stay of execution, I see no reason why the Plaintiff should be restricted in this way in its arguments against the application.  Once it is inevitable that the parties will argue before me the merits of the appeal, I see no reason why I should not hear arguments from the Plaintiff in relation to the application for leave to appeal as well.  After all, one argument from each side will help me decide both applications.  There is simply no reason why I should not invite the Plaintiff to attend the hearing for leave to appeal and make its submissions if it deems fit.

52. To avoid this Court exercising its discretion to direct serving the applications upon the Plaintiff, Mr. Ng suggests that the 2^nd Defendant may consider withdrawing his application for stay of execution at the hearing, but he may renew the application in the Court of Appeal. 

53. With respect, if this course is allowed to occur, it is surely an abuse of the court process.  In any event, Order 59 rule 14(4) of the Rules of the High Court has made it clear that the 2^nd Defendant must make his application for stay of execution before the District Court first.

54. For these reasons, I exercise my discretion and direct that the Defendants’ applications for leave to appeal and the application for stay of execution to be served on the Plaintiff.

55. Having consulted Mr. Ng, I direct that these applications shall be served upon the Plaintiff within 7 days of the hearing, and that the hearing shall be adjourned to a date to be fixed, with three hours reserved.

56. I make no order as to costs for this hearing.  Mr. Ng does not seek to argue otherwise.  There is no appearance by the Plaintiff.